With considerations such as super from various sources, non-super investments and possible Centrelink entitlements, retirement income planning can be complicated, especially when there is an age gap between retired couple members. There is so much more to think about when one partner is significantly older than the other, says actuary Brian Bendzulla, of retirement information provider Netactuary.

This includes things like having enough savings to enjoy the years you have together, along with ensuring adequate financial provision is made for the younger member who is likely to live for quite a number of years alone.

A reader writes: “I’m 74 and have a wife who turns 60 in August. Our present income is my defined benefit pension plus $330 per fortnight of government age pension and a health-care card. My wife has a $1 million do-it-yourself super fund and our other assets have only minor value. We’d like some thoughts on how we can bring in her super. A continuation of the age pension is not critical but a health-care card would be handy."

Based on average life expectancies in the last 25 years, says Bendzulla, you could easily live another 15 years together while she could spend at least that time on her own, health permitting.

Phillip La Greca from DIY super administrator Multiport says options available include starting a pension with all the DIY super, starting a pension with only part of this super or leaving all of it accumulating and making lump sum withdrawals whenever extra money is required for major purchases such as a car or holiday.

These choices are available for the next five years with the latter two, a part pension or no pension, allowing a continued entitlement to the health-care card. That’s because these options allow the wife to keep part or all of her DIY super in the accumulation phase where it isn’t counted under the Centrelink assets test until she reaches age pension age when she turns 65.

To qualify for the health-care card you need to receive at least $1 of government age pension, says La Greca. This card, which entitles a holder to cheaper medicines under the Pharmaceutical Benefits Scheme and various other potentially valuable concessions, is regarded highly by many retirees.

Which option they consider for her DIY super, says La Greca, depends on the couple’s retirement income needs. The attraction in her turning 60, he says, is that any super pension payment or any lump sum withdrawals from her super will be tax free.

Related Quotes

Company Profile

If the pension is started with all the super, the opportunity for him to receive a government pension will be reduced under the Centrelink assets test.

Under this test a couple who own their own home can have combined assets of just over $1.02 million before the government age pension entitlement cuts out.

La Greca says at 60 she is not entitled to any age pension while he is entitled to half the fortnightly age pension a couple with one eligible age pension member can receive. The maximum he could be entitled to is just under $570, made up of a basic pension entitlement of $524.10 plus half the $90.80 pension supplement in lieu of various allowances age pensioners get.

The fact that he is receiving a $330 fortnightly age pension suggests his defined benefit pension reduces his full Centrelink pension entitlement to that level, probably under the income test. Under the Centrelink income test a couple, including those where only one member is eligible for the pension, can earn $264 between them before the age pension received by the eligible member reduces at 25¢ for each dollar greater than this.

Starting a pension with all her super, says La Greca, can quickly blow any entitlement he has to a government age pension. It will also introduce the requirement to start spending her super, albeit this can be restricted to the minimum required under super rules, which is 3 per cent of the super account balance supporting the pension.

Withdrawing a part-pension from super, says La Greca, could be a more flexible option that gives the couple more income plus leaving them with an amount of money that won’t be taken into account until Centrelink rules require this.

Given she turns 60 in August means she was born in August, 1952. Under the Centrelink rules both men and women born after July 1952 and before December 1953 are not eligible for the age pension until they reach 65½ years.

La Greca says a possible flexible option for the couple is starting a part pension from her super once she turns 60. For example, if a pension was started with about $250,000 from the DIY fund this would mean $750,000 could be set aside for the future. It could keep growing at super’s tax concessional rate.

As far as the $250,000 of super committed to the pension is concerned, the minimum pension rule would require a $7500 amount to be taken at the current 3 per cent transitional requirement or $10,000 at 4 per cent when this resumes in a year or so from now. How much of this income will be assessable for the Centrelink income test will be calculated by dividing the $250,000 pension balance by her average 26 year life expectancy at age 60. The $9615 outcome would mean that virtually all of the super pension would not be income assessable with the exception of about $400. This will have little effect on his pension.